Cebu Action Plan: PH legacy for Asia-Pacific
THE PHILIPPINES’ hosting of the year-round meetings of the Asia-Pacific Economic Cooperation (Apec) for 2015 has the benefit of spreading awareness of what Southeast Asia’s rising star has to offer.
As it welcomes foreign delegates from the other 20 member economies of Apec, the Philippines showcases marvelous destinations and investment opportunities in the cities and provinces nationwide where the meetings are held. The agenda of the meetings cover a wide range of issues—trade, economics, youth and women, environment and security, among others.
But besides promoting itself to the rest of Asia Pacific, the Philippines has another equally important agenda in hosting Apec: Contribute and push vital roadmaps for regional development.
The Cebu Action Plan, or CAP, is one of them.
“Our Apec Cebu hosting is no ordinary hosting. The Cebu Action Plan we are launching is our lasting vision for a more inclusive and resilient future.
“The Asia Pacific has been on the driver’s seat of global growth in these turbulent times. We want this growth to be sustainable and directly felt by the majority of our populations.
“The roadmap we set is built on regional synergy: The race toward the future is one that is not meant to be undertaken alone. Collaboration across the region is key to shared prosperity,” Finance Secretary Cesar Purisima says.
Targeted for launching during the Apec Finance Ministers’ Meeting in Mactan, Cebu on Sept. 10 to 11, the CAP was drafted by the Department of Finance with inputs from its counterparts in other Apec member economies, the Apec Business Advisory Council, and multilateral institutions that included the Asian Development Bank, International Monetary Fund, Organization for Economic Cooperation and Development and the World Bank.
The CAP puts substance to the theme of the 2015 finance-related meetings of Apec: “Building Inclusive Economies, the Road to Financial Resilience.”
The roadmap aims to achieve a more inclusive economic growth in the Asia-Pacific region through its four key pillars: Financial integration, fiscal reforms and transparency, financial resilience, and infrastructure development and financing.
Inclusive growth—the kind of economic expansion that lifts poor people out of poverty and that empowers them with opportunities to actively participate in economic activities—couldn’t be a more fitting agenda for Apec. After all, growth is meaningless if a significant portion of the population is left out.
The scheduled launch of the CAP this week will follow a series of meetings and workshops held earlier among finance and central bank deputies, and other senior officials from finance ministries across the Asia Pacific.
Earlier meetings were held in Clark, Pampanga, in January; Tagaytay City in March; Bacolod City in April; Bagac, Bataan, in June, and Iloilo City in July. In those meets, the Philippines solicited proposals to firm up the CAP.
Global growth driver
The Asia Pacific region—which includes the world’s biggest economies such as the United States, China and Japan, and some of world’s most promising economies such as Chile, Peru and the Philippines—is a driver of global economic growth.
The region accounts for 57 percent of the world’s gross domestic product, 46 percent of global trade, about 50 percent of foreign direct investments, and 39 percent of global population.
However, the region still has a lot to do to make economic growth more inclusive. Income inequality, policymakers admit, remains a pressing issue in the region.
What makes the struggle for inclusive growth more difficult is a host of risks, including capital market volatility, weak external demand and natural disasters.
Natural disasters pose a huge challenge. The region is estimated to suffer from about $68 billion in losses every year due to natural calamities.
The Philippines is one of the countries that suffer most from natural disasters, which tend to pull back some households below the poverty line.
According to the World Bank, while poverty rates globally have dropped significantly since the 1990s, still about a billion people live with $1.25 a day or less.
“If it is shocking to have a poverty line as low as $1.25 per day, it is even more shocking that 1/7th of the world’s population lives below this line. The levels of inequality and poverty that prevail in the world today are totally unacceptable,” the World Bank said in its latest poverty monitoring report titled “Ending Poverty and Sharing Prosperity.”
For its part, the Philippines has made some inroads in poverty reduction since the 1990s. With rising investments and steadily increasing state budget for social services, poverty rate fell from 34.4 percent in 1991 to 25.8 percent in the first half of 2014.
But still, the latest poverty incidence remains far below the target, more so from being ideal. The Philippines has become one of the fastest-growing economies over the past few years, but growth has yet to be felt by about a fourth of the population.
It is against this backdrop that the Philippines is taking a step further in contributing to efforts toward inclusive economic growth in Asia Pacific.
First pillar: Financial integration
With the CAP, the Philippines envisions an accelerated process of income generation and poverty reduction through concerted efforts of Apec member economies. The roadmap is anchored on the idea that prosperity for a greater number of people can be achieved if nations boost economic ties rather than if they rely only on the individual economy’s resources.
Under the CAP’s first pillar, “financial integration,” member-economies are urged to cooperate on fostering greater financial access as well as to rationalize and harmonize rules on cross-border flow of funds to pave the way for increased trade and investments.
Complicated and burdensome regulations on foreign exchange are a drag to cross-border transactions, and easing some rules should help boost international commerce and foreign direct investments. This should lead to rise in employment opportunities and incomes.
Some of the proposed measures under this pillar include: Improvement of the supply chain financing for micro, small, and medium enterprises; sharing of strategies to enhance financial literacy and access of low-income earners to financial services; liberalization of financial services and capital accounts; and implementation of the Asia Region Funds Passport (ARFP).
ARFP is a framework for cross-border marketing of managed funds. It is meant to make financial resources in the region more accessible for various development initiatives.
Second pillar: Fiscal reforms and transparency
The second pillar, “fiscal reforms and transparency,” entails sound fiscal policy and making data on state revenues and expenditures more accessible to the public. This is expected to prompt governments to observe more effective use of public resources.
This, in turn, should create more space in state budgets for worthy infrastructure and social services.
This pillar also promotes policies against imprudent use of public funds, such as for wasteful subsidies. It is anchored on the idea that governments will have more resources for important development initiatives if unnecessary subsidies are reduced, if not eliminated.
Besides making budget and other fiscal data more accessible to the public, other measures proposed under this pillar are the exchange of information for taxation purposes (such as information on income and tax payments of multinational companies) to prevent cross-border tax leakages, and sharing of best practices on public investments and effective use of government resources.
Third pillar: Financial resilience
The third pillar, “financial resilience,” calls on member economies to implement measures that will make households, enterprises (more so micro enterprises), communities, and economies more resilient to shocks.
Ability to withstand shocks is necessary given that various risks abound and are unavoidable.
For instance, if a calamity hits, a household that has lifted itself out of poverty through entrepreneurship could slide back to poverty if its assets are destroyed. Also, a government that has already reduced its debt burden through prudent fiscal management could again find itself saddled with unmanageable debt as a result of enormous cost of rehabilitation.
Given this, insurance is a key feature of this pillar. Some of the proposed measures for financial resilience are: Governments’ creation of buffers against fiscal shocks, development of innovative disaster-risk financing and insurance mechanisms, and implementation of rules that will encourage the deepening of capital markets for risk mitigation.
Fourth pillar: Infrastructure development and financing
Under the fourth pillar, Apec member economies are encouraged to implement measures that will help boost infrastructure investments. If economies offer faster mobility and enhanced connectivity, they are in a better position to lure more job-creating investments.
With the acknowledgment that some governments do not have enough resources to fund infrastructure requirements of economies, the fourth pillar promotes the strengthening of public-private partnership (PPP) programs.
Under a PPP program, the government invites and encourages private enterprises to invest in public infrastructure, such as by offering incentives and acceptable risk allocation, as well as mechanisms that make long-term financing accessible.
Some of the proposed measures under this pillar are: Boosting of public-private partnerships; mobilization of long-term financing; development of technical capacity on infrastructure; and promotion of inclusive urban infrastructure.
Best practices from PH
With the regular gathering of policymakers and private-sector leaders, Apec provides a venue for sharing of global best practices.
In the case of the Philippines, its credibility in promoting the CAP to other member economies is supported by existing policies and programs that are reflective of the four pillars and that are recognized as international best practices.
Consistent with the aim of a financially integrated Asia-Pacific (first pillar), the Philippines, through the Bangko Sentral ng Pilipinas, has liberalized foreign-exchange rules over the years.
In terms of fiscal reforms and transparency (second pillar), the Philippines, through the Department of Budget and Management, adopts an “Open Data” policy, under which fiscal data are being made more and more accessible to the public through online platforms.
As far as resiliency is concerned (third pillar), the Philippines’ micro insurance model, promoted by the Insurance Commission, has made insurance products accessible to a significant number of low-income households and micro enterprises.
From below 10 percent years back, 28.1 percent of the Filipino population are insured as of the end of 2014, thanks to affordable micro insurance products and innovative marketing mechanisms, such as through cooperatives.
In the area of infrastructure development (fourth pillar), the Philippines’ PPP program is recognized internationally for sound practices and success over the past five years, with the PPP Center reaping several awards.
Since 2010, the PPP Center has so far awarded 10 infrastructure contracts worth $4.2 billion to private investors. It also has 40 projects in the pipeline worth $17.97 billion.
Toward the CAP’s launch
In recognition of the varying resources, laws, culture, technical capacities and degrees of member economies, the CAP is designed as a nonbinding roadmap that provides Apec economies the flexibility to decide which of the proposed measures to adopt and the timing of their implementation in line with their domestic priorities.
The majority of Apec member economies, however, embrace the principles enshrined in the CAP and are expected to formally support the roadmap.
There is consensus among member economies that income inequality is a pressing issue, and that efforts toward addressing this have to be strengthened.
As the CAP becomes a living document that guides economic policies of Apec member economies in the coming years, the Philippines is optimistic that the roadmap will help realize the goal of a truly inclusive economic growth in Asia-Pacific.
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